Strategic Management: Formulation and Implementation

Ge Business Screen

Another and more complex business portfolio framework
was developed by General Electric with the help of
McKinsey and Company, a consulting firm. There are nine
cells in the GE Business Screen.

The two composite values
for Competitive Position and Industry Attractiveness are
the plotted to locate that business's position in the
matrix. On it, both industry attractiveness and competitive position are composite
measures determined through an analysis and weighting of
a variety subfactors, including rate and market share.
Some of the criteria used to determine industry
attractiveness and business strength are shown in Table
4-3.

Calculation of a score for Industry Attractiveness per
product or strategic business unit is a five-step
process:

*First, select the criteria used to evaluate the
industry. Some of the criteria used to determine
industry attractiveness and business strength are
shown in Table 4-3.

*Second, weight each criterion in accordance with the
strategic decision makers' judgment of the
importance of the criterion to the firm's
objectives.

* Third, rate the industry on each of the criteria
selected in the first step, usually with a scale
ranging from 1 to 5.

*Fourth, multiply the weights from the second step
by the ratings from the third step to achieve a
weighted score per criterion.

*Fifth, sum the weighted scores to find a total
attractiveness score for the industry. The area of each circle is proportional to the size of
the industry, and the size of the pie slice within each
circle reflects the business's market share.

The following steps outline a methodology for using the
industry attractiveness-business strength matrix:

* Step 1:Definition of critical internal and external
factors. The internal factors are those which are
controllable by the firm. The are mainly the
functional activities that can be deployed by
business units to succeed against competition.
The critical external factors, that
are essentially uncontrollable by the firm, are
basic characteristics of the industry and
competitive structure in which the business operates
and a host of other factors, such as socio-
political, economic, legislative, regulatory, and
demographic factors.

* Step 2:Assessment of external factors. Once
external factors are identified, we have to
determine each contributes to the attractiveness of
the industry to which the business belongs each factor
is grated according to a five - point scale:

--Extremely unattractive
-Mildly unattractive

E Even attractive
+ Middle Attractive
++ Extremely attractive

In the quantitative approach a weighted average is
computed on the basis of assigned weight and ratings
for each factor. Calculation of a score for Industry Attractiveness
per product or strategic business unit is a five-
step process.

First, select the criteria used to
evaluate the industry. Some of the criteria used to
determine industry attractiveness and business
strength are shown in Table 4-3.

Second, weight each
criterion in accordance with the strategic decision
makers' judgment of the importance of the criterion
to the firm's objectives.

Third, rate the industry
on each of the criteria selected in the first step,
usually with a scale ranging from 1 to 5.

Fourth,
multiply the weights from the second step by the
ratings from the third step to achieve a weighted
score per criterion.

Fifth, sum the weighted scores
to find a total attractiveness score for the
industry.

* Step 3: Assessment of internal factors. Again a
five-point scale is used (Figure 4-11). The five
points of the scale correspond to:

Business Strength/Competitive Position is
mathematically computed in a similar fashion to the
one described in Step 2.

* Step 4: Positioning of the Business in the
attractiveness-strength matrix. In the growth-share
matrix approach popularized by the Boston Consulting
Group (BCG) a different procedure is used. For
example Hofer and Schendel use a graphical display
in which the areas of the circles are proportional
to the sizes of the various industries and the
business's current market share in that industry
is represented by a shaded pie-shaped wedge.